Lolz

July 26, 2010

Suppose I were to propose a specific tax proposal. This, of course, is a strange hypothetical. I am not an economist nor a tax lawyer nor any other kind of expert on tax policy. Putting out a detailed proposal, with bracket boundaries and rates defined, would be odd at best and arrogant at worst. But suppose I decided to do this. There would be some preliminary steps I would have to take before writing anything about this proposal. I would search for similar ideas among think tank reports and scholarly articles, as well as news reports from other countries. If evaluations existed, I would read them, paying attention to the effect similar proposals had on economic growth, revenue, and so forth. If the literature were scarce or non-existent, I would think about what that indicates about my proposals. If countries had adopted a similar plan, I would see how it worked out in practice. If none had, I would wonder if there were a reason for that.

If I chose to go forward from there, I would call relevant experts. I might talk to Emmanuel Saez about its effect on wealth and income distribution. I might call David Romer and ask about its effect on economic growth. I would almost certainly contact the Tax Policy Center and see if one of their experts could hazard a guess on what effect the change would have on revenue, hopefully using the tax microsimulation model they use to produce revenue estimates for legislation. I wouldn't take their word as gospel, but I would accept that these people know more than I do about the likely effects of my plan. Then, if I judge that a plan with the effects my sources predict is worth doing, I would write something, using this background research to convince my readers the plan would work.

This isn't meant to show that I'm some exceptionally diligent researcher. This is just how a non-expert writes about policy.She does her homework, reads the relevant literature, consults the relevant experts, and then draws her own conclusions from it. It is what Benjamin Kunkel did in his excellent article on full employment in this spring's issue of n+1. He familiarized himself with competing theories on the subject, discussed it with economists, looked at data, and wrote up the results.

Kunkel's colleague Mark Greif, in his recently republished article "Gut-Level Legislation, or Redistribution", does none of this. I have a lot of philosophical problems with the piece, not least its belief that privilege based on unearned intelligence or "ability" is less noxious than privilege based on immutable characteristics like race or sex. But my main problem is with this:

§ Legislative Initiative No.1: Add a tax bracket of 100 percent
to cut off individual income at a fixed ceiling, allowing any
individual to bring home a maximum of $100,000 a year from all sources
and no more.

The problems with this should be clear enough. A tax bracket of 100 percent placed on income above $100,000 would effectively set that as a maximum wage. No business would pay a worker a dime over $100,000 knowing that it would all go to the government. Consequently, the bracket would raise no revenue, as it would have no tax base after businesses cut their top salaries to $100,000 in response. It would, however, lead to lower economic activity, as high earners have less to spend, which would lead to fewer purchases of goods and services, and thus less employment and lower wages among producers of goods and services. High earners would also have less to save, which would reduce the availability of capital to businesses and consumers, also leading to lower living standards.

In economics, this is known as "deadweight loss", and it occurs whenever a price ceiling, such as a price ceiling on yearly wages, is set below the market equilibrium price, which for high earners is well above $100,000 a year. Deadweight loss is inevitable with taxation, but usually taxation has some redistributive effect that is also desirable. Greif's proposal, however, raises no revenue, and thus redistributes no money. Poor people are not better off in Greif's world. The economy, and all who work and shop in it, are just much poorer.

How much poorer? I do not know. I have not calculated the deadweight loss from this proposal's implementation. It would certainly be big, in the hundreds of billions or trillions of dollars yearly if I had to guess. But I do not know. And neither does Greif. Yet he wrote this article, proposing this tax plan, and does not defend the plan against these obvious criticisms. He does not offer a single estimate of the plan's effect on economic growth, on consumption, on savings, on federal revenue, on anything. To borrow a phrase from Raymond Geuss, he "allows that bald statement to lie flapping and gasping for breath like a large, moribund fish on the deck of a trawler".

Greif is, or can be, a great writer. I remember fact-checking this article of his on Richard Rorty and being impressed by the clear, lucid explanation of what for laymen is a difficult subject. But in n+1 he appears to content himself with a polemical style that is non-responsive to even the most obvious of objections. It allows him to state, in "On Repressive Sentimentalism", that in the twentieth century, "No change was more momentous and utopian than that men could choose men
for love objects, and women choose women, to remake the sexual household," without being expected to consider the obvious dissent, that perhaps during that century there were changes more momentous, or more utopian.

The genius of Tom Scocca's response to that article is that he refused to play the game. Debunking Greif by pointing out that yes, in fact, the development of antibiotics is a more momentous change than same-sex partnerships, is not something his piece anticipates. In fact, it's so outside the kind of discussion Greif wants to have that his editor, Keith Gessen, dismissed it as "heckling", and scoffed at the idea that it could be the substance of a critique. But it's not only substantive, it's obvious. That Greif did not even think to answer it suggests that this mode of argumentation is failing not just his readers, but him.

Writing about policy is not the hardest thing in the world, but it is a skill. Like any other skill, acquiring it requires a willingness to listen and learn, and an appropriate humility about what one, as a non-specialist, can say. Greif did not listen, nor learn, nor show much hesitation when writing with great specificity about a subject with which he appears unfamiliar. He just wrote, without considering what might go wrong.